In the widest sense, globalisation refers to the trend towards increasing interactions of all kinds between different countries. In this paper, we shall restrict our attention to increased interactions in the sphere of economics: international trade in goods and services, and movements of factors of production, especially capital, across international boundaries. Our concern will be to discuss the policies followed by the Indonesian government in relation to globalisation and the impact of those policies on Indonesia's economic performance.

The rationale for policies that facilitate and encourage flows of goods and services or movements of productive factors across national boundaries is quite simple: it is expected that such policies will result ultimately in goods and services becoming cheaper to consumers, or that the quality of those goods and services will improve.

Indonesia West Irian Jaya map

Pseudovanilla foliata, image taken in Warmare, Pap...

Globalisation: Peugeot in Jakarta, Indonesia. Inte...

In short, policies that are in harmony with the natural, market-driven tendency to globalisation are expected to improve standards of living.

Globalisation and the Indonesian Economy

We shall focus here on four phases of Indonesia's modern economic history, starting from the early 1960s. At this time, the economy was experiencing a severe crisis as a result of political turbulence and poor economic management (Hill 2000: 1-3). Beginning in 1966, the government of President Soeharto - who was in the process of taking over from Indonesia's first president, Sukarno - put very heavy emphasis on the foreign investment aspects of globalisation. It was believed that one of the keys to getting the economy on the road to recovery was to encourage foreigners to come to Indonesia, bringing with them scarce capital in order to establish new productive enterprises.

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